Nets set to fall flat in $9B upfront

There will be no explosive upfront TV market this year, only a slow burn.

The broadcast networks are likely to stay stuck at around $9.1 billion, though the total TV upfront marketplace is expected to grow by low- to mid-single digits this year, with cable adding anywhere between $500 million to $700 million to last year's estimated $6.3 billion upfront haul. That's the verdict from a wide range of industry buyers who've been huddling with clients of late to determine TV budgets for the coming season.

"Everyone thinks the networks will be flat," said Bill Cella, chairman of Magna Global, part of Interpublic Group of Cos.

Mr. Cella is one of many agency heads expecting that the 2005 upfront won't end up all that different from last year, though there are some factors working to buyers' advantage this time around. No single network is dominant this year as Fox, CBS, ABC and even NBC remain engaged in mortal combat for the 18-to-49-year-old viewer and there are more ratings points around. That gives buyers more choice than they've had in previous years, though CBS and ABC are best positioned to take advantage, with Fox and NBC having a tougher time.

John Muszynski, CEO of Publicis Groupe's Starcom U.S., Chicago, said: "If the ratings supply is up, that should help soften things. If the demand is not up, you can't get an increase in pricing. Certain individuals have had good years and promising shows. But that by itself doesn't warrant an increase in CPM-end of discussion, there's got to be more to the equation. There's got to be demand."

WEAK DEMAND EXPECTED

Few think that demand will be strong, given softness in recent scatter markets and problems in the economy. U.S retail sales for March grew by only 0.3%, less than the 0.7% economists were expecting. Rising oil prices coupled with problems in categories such as DTC pharmaceuticals and automotives doesn't help. Views on whether the recent wireless spending boom will end as a result of sector mergers are mixed, as are projections about how strong the movie/DVD category will be. Fast-food spending, however, is expected to remain strong.

CBS is expected to look for mid- to high single digit cost per thousand (CPM) increases off the back of the 9%-10% increases it asked for last year. Buyers aren't sure which tack ABC will take, but most expect them to take advantage of their new position in the ratings by upping either its CPMs or unit pricing.

Of the broadcast networks, only Fox responded for comment. Jon Nesvig, Fox Network president-sales, said: "Broadcast networks showed little or no erosion from last year. Fox's success with `House,' `The O.C.,' `24' and the continued success of `American Idol,' and the post-season basketball...give us confidence that our upfront selling season will be very successful."

All eyes on NBC

So far, only Viacom Co-President and CBS Chairman Les Moonves has made any public noise on pricing, saying that the network would command, "significant increases," from its clients. All eyes at the moment are on how NBC will position given its prime-time slump. Some say the network might hang back a little and see how things shake-out before articulating its own pricing demands.

Stacey Shepatin, senior VP-director of national broadcast at Interpublic's Boston-based Hill Holliday agreed that the networks would be hard pressed to move off last year's $9.1 million base. Ms. Shepatin is among many who think cable will gain at the expense of others. The cable volume is estimated to be up 6%-10% this year. "Cable will increase $700 million," said Ms. Shepatin, though she added that clients' budgets were being finalized.

According to a number of buyers, this year cable executives are strategizing to take as much out of syndicators' pockets as possible. Though Joe Uva, CEO at Omnicom's OMD expects some good buys to be had in the syndication market this season. Syndicators booked estimated $2.8 billion in last year's upfront.

The upfront may also be strained by a move to spend more money year round, not just in scatter but on integration opportunities. "We'll be at or around last year's volume," said Peter Gardiner, chief media officer at Interpublic's Deutsch. "The big thing we've seen is that people aren't laying everything down on the upfront, people are holding some money back for a bunch of reasons. One is the TV scheduling season has changed pretty dramatically. There's lots of opportunity in scatter market for new shows, integration deals."